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Without any hesitation, Nvidia Corporation (NASDAQ:NVDA) is easily one of the best-performing investments in recent years. In 2016, NVDA stock returned a stunning 234% in the markets. This year, Nvidia has so far gained 36.5%. While it’s a far cry from last year, it’s still a remarkable performance following the second-strongest showing in company history.
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Yet investors are now questioning whether or not Nvidia stock can live up to its potential. Since June 21, NVDA shares shed 7% of their market value. More worryingly, the company has enjoyed only one up-day in a sea of red candlesticks.
During the same time frame up until July 5, Advanced Micro Devices, Inc. (NASDAQ:AMD) lost 9%, mimicking almost trade-for-trade Nvidia’s woes, though it has surged in the latter part of this week.
Is a broader culprit at work? Certainly, semiconductors are taking it on the chin lately. For instance, big shot Intel Corporation (NASDAQ:INTC) is down more than 7% since the beginning of June, while Qualcomm, Inc. (NASDAQ:QCOM) has yet to find consistent footing since its fallout earlier this year. Nvidia stock could simply be trading at the right place but at the wrong time.
That being said, I don’t want to lump NVDA with its rivals. In my opinion, this is one of the few companies dominating its core business while building for the future. It also has more stable financials than a majority of the competition.
Does this mean that investors should just plug their nose and buy NVDA stock on these dips?
Markets are Overplaying the Negatives
Quite frankly, I view the current correction as a lucrative opportunity. Of course, a big part of the answer depends on your time horizon and expectations. As a day-to-day swing, I don’t want to hazard a guess. But over the long haul, I still see tremendous potential in NVDA stock.
Again, I come to this assessment based on Nvidia’s forward-looking strategies, primarily its role in advancing driverless cars. But the reason why I’m particularly confident about NVDA is that the markets appear too focused on the negatives.
A common argument against NVDA stock is that it has gone up too far, too fast. As previously mentioned, Nvidia shares are backing up a triple-digit return with a double-digit one. The only time in its history this has occurred was in 1999 through 2000. In every other instance, shares declined significantly.
But as Wall Street likes to remind us, past performance is no guarantee of future results. And as a quick reminder, simply going off the reasoning that all hot stocks must collapse resulted in sharp regrets. Years ago, you could have used the same argument against Amazon.com, Inc. (NASDAQ:AMZN) or Facebook Inc (NASDAQ:FB). Now, only a madman would think about shorting them.